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How Much Does It Take To Feel Rich?

Monday, March 28, 2011 - 4:59 PM
From the CBS MoneyWatch The Daily Money blog:
In a recent survey, more than 40 percent of millionaires said they don’t feel wealthy. [...] The millionaires who don’t consider themselves wealthy said it would take $7.5 million in assets beyond what they have stashed in retirement accounts and excluding the value of their real estate, before they would in fact consider themselves wealthy.

In my opinion, to feel wealthy requires that you have enough money to live well without a job for the rest of your life. How much does one needs to "live well" is up for debate, but a reasonable number in today's dollars is $200K per year. Assuming a 2% withdrawal rate, that would require one to have $10 million in savings. With the very low interest rates, uncertainity in the stock market and the potential for future high inflation, a 2% withdrawal rate seems more reasonable than the typical 4% withdrawal rate.
Ken TuminKen Tumin5,472 posts since
Nov 29, 2009
Rep Points: 125,708
1. Monday, March 28, 2011 - 9:06 PM
"How much does one needs to "live well" is up for debate, but a reasonable number in today's dollars is $200K per year.  Assuming a 2% withdrawal rate, that would require one to have $10 million in savings."

You have got to be kidding me. Unless you intend to live well past 100, and leave your entire estate to heirs, I don't see how one would require such a large amount of income and financial assets to "live well". Of course if you define as living well staying at a suite in Monaco half the year, and in a ocean view villa in Hawaii the other half, perhaps you are right. I'm living well on much less and are probably happier for it. 
ShorebreakShorebreak2,695 posts since
Apr 6, 2010
Rep Points: 14,614
2. Tuesday, March 29, 2011 - 12:33 AM
Shorebreak, although $200,000 is a lot of money, there are places like Ca.and NY where that amount of money is not going to give you a great lifestyle. By the way, a suite in Monaco and ocean villa in Hawaii will require much more than $200,000. I do agree that you don't need $10 million to live well. I think Ken underestimates the withdrawal rate. 2% is too low.
loulou554 posts since
Aug 3, 2010
Rep Points: 3,436
3. Tuesday, March 29, 2011 - 8:20 AM
Thus, we are to assume, one has to be in the top one percent of wealth holders in this country to "live well". Good luck.
ShorebreakShorebreak2,695 posts since
Apr 6, 2010
Rep Points: 14,614
4. Tuesday, March 29, 2011 - 12:35 PM
Even $25M or $100M will not make a person fulfilled and secure, it is a never ending pit (vanity) that leads to the ultimate grave.

What is the real purpose of life??

Nowadays people are much more un-satisfied with their lives than 20-30 years ago and they have much more money and luxuries in general than the last era.  It proves my point that pursuing financial security related to the boring measure of total asset is a true loser's game. 

BTW, all those reporters have nothing better to do than coming up with such boring topics; no quality, no class,  and no significance.

We all need money (up to a certian degree) to make a living, but the infinite pursuit and emphasis of financial wealth and stability simply demonsrate the emptiness of this society in general.

To be content is a great gain by itself.
51hh51hh1,476 posts since
Jan 16, 2010
Rep Points: 6,427
5. Tuesday, March 29, 2011 - 7:01 PM
My Mom is 95, going on 96. Coming of age in the Depression, she always felt uncomfortable "touching" any of her principal after Dad died. I've arranged her finances so that all her expenses are covered by her Social Security, two annuities, and the interest on her "big" CD (with USAA). She still rolls all her stock and mutual fund dividends over with dividend re-investment; doesn't touch a penny there. Now, mind you, she's an extreme example of thrift. For most folks (and the Trinity Study and its modern iterations bear this out), a safe withdrawal rate is from 3 - 4%/annum, with inflation adjustments. Where you fall in this band depends a lot on your asset allocation. Our asset allocation is what I would call "conservative" (we follow the "age in bonds/cash" principle), 63% CDs/bonds, 37% equities. Once my wife retires, we'll probably use a SWR of 3.5% until we have to boost it a bit because of the RMD for IRAs. For folks interested in this subject, it is discussed, and discussed, over-and-over, at Bogleheads. Bogleheads also has a Wiki on SWR, with references, for those truly bored. But don't worry, once you hit 70 1/2, the IRS kinda takes the SWR out of your hands, unless your SWR is higher than your RMD.

Happy retirement planning.

Bozo (retired)
BozoBozo137 posts since
Feb 14, 2011
Rep Points: 944